getting the drift?

TELSTRA SAYS IN NEGOTIATIONS ON VENTURE WITH SHANGHAIGENERALBy Alan WoodSYDNEY, July 2 AAP - Telstra's push into Asia hasgathered pace with a new joint venture project withChina's Shanghai General Electronics (Group) Co likelyto involve the Australian telco providing services tothe lucrative Shanghai market.This follows Telstra's announcement yesterday that ithas taken 100 per cent of CSL, a Hong Kong mobiletelephone operator, and is part of its plans to sourcemore revenues from offshore.Telstra International spokesman Graeme Salt said todaythe joint venture discussions had formally startedyesterday, but a structure still had to be negotiated.Analysts said the further push into China was sensiblegiven Telstra's strong balance sheet giving it theability to pickup assets relatively cheaply in a timeof telco sector downturn.One analyst said Telstra had signalled its capitalexpenditure would remain constrained in the Asianregion and it would look to extract value from theregion via such partnerships.Shanghai General Electronics Group is the manufacturerof various electronics components and suppliesinternational companies such as Motorola Inc.Mr Salt said he could not comment on how much Telstrawould likely put into the Shanghai venture but notedTelstra was "an active investor and major participant"in such projects.He said any agreed joint venture would look to providetelco services in the Shanghai region, particularly tobusinesses in the area of broadband - the transmissionof a large amount of electronic information includingtelephone calls, television and the internet."Shanghai municipality alone has got a population of13 million, and the surrounding area has got apopulation of nine million so it's larger thanAustralia in itself," he said.Mr Salt said it was possible that Telstra's initialstake in the venture could be around 30 per cent - butthen work up towards 50 per cent, he added.That would relate to China bringing down foreigninvestment barriers post the country's accession tothe World Trade Organisation.Telstra yesterday announced it was taking full controlof Hong Kong mobile phone operator CSL, as a platformfor other possible acquisitions in SouthEast Asia andparticularly China.To take 100 per cent of CSL, Telstra agreed to buy theremaining 40 per cent stake in holding companyRegional Wireless Co (RWC) from Pacific CenturyCyberworks Ltd (PCCW) for an effective price of $US475million.Telstra also has a 50:50 internet infrastructure jointventure with PCCW known as Reach Ltd based in Asia.Last year Telstra chief executive Ziggy Switkowskisaid the telco wanted about 20-25 per cent of itsvalue to be in Asian-based business within five years,and would look to play a part in Beijing's 2008Olympic Games.In China, Telstra has a partnership with leadingChinese mobile provider China Unicom, under which itis exploring business opportunities.Yesterday Dr Switkowski said Telstra's offshorebusinesses currently contributed about seven per centof Telstra's earnings before interest, tax,depreciation and amortisation (EBITDA), and thefurther CSL stake would take this figure to about 8.5per cent.AAP arw/sh

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